PARIS, Feb 10 Euro zone countries should launch
ambitious new projects like common unemployment insurance to
counter a surge in support for Eurosceptical parties, French
Finance Minister Pierre Moscovici said in an interview.

Opinion polls suggest anti-EU parties are likely to make big
gains in European Parliament elections in May, channelling voter
frustrations with mainstream politicians' handling of a debt
crisis that caused a prolonged recession and high jobless levels
in many euro zone countries.

"The euro zone needs to be further integrated, the euro zone
needs to be stronger so that citizens' attachment to their
currency is firmer," Moscovici said in an interview conducted on
Jan. 30 as part of a Reuters Euro Zone Summit involving
policymakers, politicians and market players.

A social democrat who previously served as European affairs
minister and in the European Parliament, Moscovici suggested the
18-nation currency area should set up a joint budget to tackle
unemployment.

"France wants a financial capacity, call it a budget, that
could be used for unemployment insurance, which could -- why
not? -- be financed by some of the proceeds from the financial
transaction tax," Moscovici said.

Eleven EU countries have agreed to introduce such a tax but
the plan has been dogged by EU lawyers' doubts over its
legality. Paris and Germany aim to produce a joint proposal in
the coming months to get the scheme launched.

Berlin has so far rejected any notion of a common euro zone
unemployment benefit or other fiscal transfers beyond the
existing EU budget, which amounts to less than 1 percent of the
bloc's output -- a fraction of national budgets.

Chancellor Angela Merkel has accepted the principle of a
small "solidarity fund" to help stressed euro zone states that
make a contractual commitment to structural economic reforms.

Moscovici did not elaborate on how joint unemployment
insurance might work, but a 12-page report commissioned by the
French Treasury last year proposed a basic euro zone benefit,
which national insurance programmes would supplement.

With a budget equivalent to 2 percent of GDP, the euro zone
could provide 20 percent of unemployment benefits and other
measures governments use to smooth out swings in the economic
cycle, the study calculated.

Moscovici said improving the governance of the euro zone was
another major project the bloc's leaders needed to tackle.

He called for a full-time head of the Eurogroup of finance
ministers, an idea backed by Germany and Italy, saying it could
be merged with the existing post of EU economic and monetary
affairs commissioner. Currently, Dutch Finance Minister Jeroen
Dijsselbloem chairs the Eurogroup in a part-time capacity.

Moscovici has been mooted in the past as a possible
candidate for either post, but he dismissed the idea that he was
interested in any such role.

"I'm not a candidate for any job other than my own, and it's
a very good job by the way," he said.

TREATY CHANGE

Despite his ambition for further euro zone integration,
Moscovici saw no rush for a new treaty, although Britain is
eager for changes to give it more flexibility in the European
Union.

British Prime Minister David Cameron has promised a
referendum on continued EU membership in 2017 after a proposed
renegotiation if his Conservative party wins a general election
next year.

Germany has said treaty change may be required for deeper
integration of the euro area, but most other members oppose
reopening the treaty to avoid divisive negotiations and
difficulties with ratification.

"Everyone prefers to work within the current treaties, I
think," Moscovici said, linking any change to the prospect of
pooling euro zone government debt issuance.

"Our German friends never said they ruled out (joint) euro
bonds, but that it was result of a process, and then a treaty
could be justified. The modification of the treaties can not be
a precondition."

Before it embarks on such projects, the euro zone has yet to
complete the foundations of a banking union, with tough
negotiations looming between member states and the European
Parliament over a system for tackling failed banks.

EU governments agreed with great difficulty in December on a
draft plan for a single resolution mechanism to decide when and
how banks need to be wound up. They aim to wrap up the
negotiations before European elections in May but lawmakers are
pushing for substantial changes.

Moscovici ruled out radical changes to the plan, which aims
to build up over 10 years a fund financed by levies on financial
institutions to cover the cost of bank failures after
shareholders and creditors have taken losses.

EU parliament lawmakers want a stronger common safety net
for failed banks, empowered to borrow on financial markets or
from the euro zone's rescue fund, but Germany and its allies
have blocked any direct recourse to taxpayer funds.

"We've done everything we can so that decisions are taken
during the mandate of the current parliament. It would be our
collective mistake not to do so," Moscovici said.

FRENCH RECOVERY

Turning to the outlook for France, Moscovici said he hoped
President Francois Hollande's plans for tax breaks to boost
business activity would begin bearing fruit this year.

In a shift towards more business-friendly policies, Hollande
offered last month to phase out 30 billion euros ($40.8 billion)
in payroll charges that companies pay annually to finance family
benefits in exchange for a commitment to meet targets for hiring
and investment.

With France's recovery lagging many others in the euro zone,
Moscovici said growth in the euro zone's second-biggest economy
could top the 0.9 percent forecast thanks to the plan.

"We want France to have growth above the euro zone average,"
he said. "France's place is not in the euro zone's average, but
as a leader."
($1 = 0.7353 euros)

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